Munich’s first Kapitalmarkt Kolloquium organized by financial.com, was fully booked with over 250 visitors at the Sofitel Munich Bayerpost. The new conference format deals with digitization and innovation in the financial industry. The conference topic “Artificial intelligence, automation and intuition: how are services and jobs changing in the financial industry” was discussed in four lectures and a panel discussion.

Carsten Eckert, founder and managing partner of Insticube, presented a new form of transparency for the institutional investment market. Special funds are not open to public inspection like mutual funds, but they are the vehicle for major investors such as pension funds, insurance companies, trade unions or church institutions. Insticube offers a unique database where 612 institutional investors currently provide feedback on 15,150 mandates with 449 asset managers. In total, this creates complete transparency for an investment volume of 2.3 trillion euros. In the last 3 years, the share of passive investments has increased from 18% to 38%. Interestingly, however, the fees are only ranked in 10th place of the most important decision criteria. As expected, the performance of the fund is in first place, followed by the transparency of the investment process and the consideration of customer-specific investment requirements. The least important of the 12 criteria is the size of the product range. Institutional investors are very open to investment boutiques that specialize in specific areas. In exchange for the valuation of asset managers, institutional investors receive the assessment of their peer group and can thus reflect their own view. The database also offers very interesting recommendations because institutional investors also exchange views on the most interesting pitches.

Dr. Lothar Jonitz, founder and managing partner of tetralog, presented a comprehensive portfolio management solution that supports investment advisors at the client interface. In 1995, his company was the first to integrate the algorithm of Nobel laureate Harry Markowitz into a software package and thus calculate “optimal” portfolios for investors. Investment advisors can determine the investment universe and construct an individual, efficient portfolio together with the client. By using a state-of-the-art algorithm with a live implementation, the advisor can sell very convincingly. The algorithm assumes the role of the actual investment advisor, but the parameters are controlled by the advisor, who also gains more time for addressing the client.

Prof. Dr. Stefan Mittnik, holder of the Chair of Financial Econometrics at the LMU Munich and co-founder of the leading Robo-Advisor Scalable Capital, then presented his assessment of “Digital Investment Solutions in Europe: Status Quo and Outlook”. Banks are currently facing major challenges such as low interest rates, regulatory pressure, reputation problems and old IT systems. This is making customer service increasingly difficult. Young Fintech companies can therefore relatively easily create modern offerings that generate significantly higher customer benefits. According to Stefan Mittnik, established banks only have the 4 K-strategies left: copy, co-op, buy or capitulate. Scalable Capital is the leading online asset manager in Europe with 80 employees, more than 30,000 customers and over 1 billion euros in customer assets. Although they are growing faster than the US pioneers Wealthfront and Betterment, they have between 8 and 11 times as much investor money in administration. However, the largest providers are not start-ups, but offshoots of established companies such as Vanguard Personal Advisor Services (USD 100 billion) or Charles Schwab Intelligent Portfolio (USD 27 billion). In addition to direct asset management, Scalable Capital also offers its platform as a white label service to cooperate with established banks.

Björn Torkar, Managing Partner of Privé Technologies, highlighted the major IT trends of recent years. Mobile devices are now used for Internet access by 39% of people in Germany. Two thirds of all 16- to 74-year-olds already make purchases online. At the end of 2017, mobile devices overtook the desktop in online shopping for the first time worldwide. 51% of all Germans are “active users” of social media. The spread of technologies is also accelerating. While the telephone still needed 75 years for 50 million users, the Pokémon Go App achieved the same range in two weeks. The digital society acts, communicates and exists online and offline. In this environment, the financial industry is changing completely. The branch loses importance, while digital channels become more and more important.

The biggest threat comes from Google, Apple, Facebook and Amazon, all of which have already announced their own financial services. Customers today want individuality (mass customization). The focus is on the “user experience”. Customer interaction must enable live and mobile messaging, as well as video conferencing and, best of all, gamification. In 2017, only 17% of customers still prefer offline consulting, while 42% prefer hybrid consulting (face-to-face and digital). After all, 43% only want purely digital advice.

Finally, there was a panel discussion on the question of which jobs will be taken over by robots and which by people in the financial industry in the future. In addition to Stefan Mittnik, Carsten Eckert and Björn Torkar, Dr. Jochen Papenbrock also sat on the podium. He studied and received his doctorate in computer science at the Karlsruhe Institute of Technology before founding his company Firamis, which specializes in AI in the financial sector. Artificial Intelligence is now accessible to everyone due to the Open Source movement (Jochen Papenbrock) and is therefore becoming more and more relevant. Nevertheless, there is currently a lot of hype about this topic, despite or because many managers have no profound knowledge of the subject (Björn Torkar). An ever larger quota of passive forms of investment as well as strong regulatory pressure lead to synchronisation and thus to a greater potential for setbacks in the markets (Stefan Mittnik). If individual portfolios are formed here by AI, the risk tends to decrease. The validation of data is crucial for further processing by computer systems (Carsten Eckert). An important criterion for the acceptance of AI is human control (Human Centered AI). Especially supervisory authorities and customers want to understand decisions, which is why there are strong efforts towards an Explanaible AI (Jochen Papenbrock).

Dr. Herbert Reiter takes over as the new Chief Technology Officer (CTO) at financial.com. In the years 2008-2012, Dr. Reiter has introduced NGP technology to financial.com, which powers most of the company’s current products. Prior to that, he received his Ph.D. in computer science from the Technical University of Munich and his graduate diploma in computer science from the University of Passau. From 2012 to 2018, he worked in the automotive industry, gaining valuable international management experience. Now he returns to financial.com to once again set future standards in technology. Dr. Reiter says: ‘I am excited to support financial.com to raise its solution platform for future customer needs’.

Dr. Reiter’s predecessor Wolfgang Kronberg has been with financial.com since 2000 as a Software Architect, Head of Data Access Solutions, and Chief Technology Officer. In his new position as a Chief Solution Architect, he will continue to play a key role in future technical developments at financial.com. Mr. Kronberg says: ‘I am happy that we could have Dr. Reiter join us and lead financial.com into the future of technology. It is a pleasure to work with him. He will build upon and extend the innovations introduced during my tenure. Regarding my personal future at financial.com, I am extremely looking forward to designing and coding software again’.

On November 13th and 14th 2017 there was cause for the JavaScript experts to meet at Munich’s Old Congress Hall for the second JS Congress. Our developer Béla Varga was one of the organizers of the event. This year’s topic was “The Future of JavaScript” – an issue of utmost importance in our fast developing digital world. The mix of lectures, discussions and sharing of knowledge allowed for a creative space that enabled vital exchange and created the perfect setting for the development of new ideas.

Today 18 years ago, we established financial.com. On the road to adulthood we have experienced many successes (and failures). In retrospect, successes always appear to be exactly planned while failures – fortunately – get forgotten. Today it’s a chance to tell the story again and look back gratefully.

We decided to rent an office in the Euro-Industriepark in Munich. Far out in the north of Munich the rent was low. While many New Economy companies spent their investors’ money for best locations in downtown Munich financial.com’s focus has always been on a sustainable operating cash flow. We thank our early employees who joined a small company and valued table soccer and bench press higher than designer furniture. In 2011 we moved to a modern office in Schwabing.

Our first product was a warrant calculator hosted on options.de which allowed investors to calculate the Greeks in real-time. At that time there was only a print magazine that was already outdated as soon as it was sold at the kiosk. Our website was a niche business. Happily, Goldman Sachs, Unicredit, and Société Générale trusted us and bought advertising.

We wanted to grow the business both across all asset classes and in many countries. The purchase of the domain financial.com was an important milestone for our strategy. We soon learned that running a financial portal is very expensive. We could neither afford market data nor exchange fees. But at least we developed the software to deliver the data ourselves. In 2000 we were the first company that displayed Reuters market data in the internet. Soon Reuters asked us to close our portal and instead help their customers build financial websites. In April 2000, we entered a strategic partnership for bespoke solutions with Thomson Reuters that has become the foundation of our corporate strategy. Due to this partnership we established an office in Frankfurt close to Thomson Reuters in 2001.

In 2003 we took the next step and developed customized market data terminals. With high-quality content of Thomson Reuters and comprehensive permissioning we laid our focus on finance professionals. During the first 10 years of our partnership financial.com was mainly active in Germany and Continental Europe. In 2010 we expanded our activities into the Americas. In February 2014 we opened an office in Toronto, followed by a data center in Chicago in 2017. Furthermore financial.com started a branch office in Kochi, India, as a development site in 2015.

Over the years financial.com has grown continuously to more than 100 employees. We see ourselves well positioned for the future as many megatrends favor our business model. Customers buy fewer and fewer standard products and ask for more customization. Many fintech companies are attacking banks and force them to invest in innovative solutions developed by firms like us. Moreover, regulators require more transparency and risk management than ever.

Just like Thomson Reuters, our company has always remained a family business with focus on sustainability and long-term increase in value. We feel privileged that we can do what we love with the people that we like. We thank all customers and employees for their support and for their passion.

On September 11, 2017, the Münchner Finance Forum e.V. hosted its 13th Annual Conference at the AudiMax of the TUM. The subject of the conference was “Return production and risk management in an ambitious environment”. Despite school holidays in Bavaria 409 guests took the time to discuss with five speakers at the event.

Dr. Thomas Hartmann, CEO of GBW (PLC), about “Commercial Real Estate as Asset Class”, held the first lecture. Residential property differs from other products in that the customer has to come to the product. Therefore, demography is an essential value driver for demand. In Germany, there are large migration movements between East and West, as well as between town and country. Furthermore, there is an increasing consumption of living space through growth in single household numbers. The debt crisis of the Eurozone has brought circa 1,000,000 migrants from Europe in 2009, for whom no living space was planned earlier. Moreover additional regulatory requirements until 2009 had led to decreasing permits for apartments. Today fewer apartments are approved Germany-wide, than would be needed in Berlin alone. Additionally it is not certain, whether increasing interest rates reduce demand. Almost 80% of all apartments belong to private individuals. 43% of those are owner-occupiers; another 37% of apartments are bought as an investment. Professional vendors are in the minority. Since many private individuals acquire real estate through long-term loans, they have an implied protection against an increase in interest rates because of fixed cashflows. In addition, private individuals attach emotions to real estate. That is why prices do not necessarily have to fall because of interest rate increase. Moreover, realty as a product changes heavily through digitization, which brings new sales possibilities for commercial providers.

Subsequently Prof. Dr. Manfred Schwaiger, dean of studies at the institute of market-based management of the LMU Munich, spoke on the topic “Corporate reputation, financial performance and corporate risk”. He was able to show that the share of “Intangible Assets” concerning market value of real estate has increased strongly since 1980. Book value decreases relatively speaking during assessment. The difference can be interpreted as reputation. Through surveys, which are regularly conducted by market research companies at all stakeholders of a corporation and are commissioned by his institute, one can determine a reputation value. This reputation value can be used in Asset Pricing models like Fama/French (1993) as another variable. Hereby reputation during investment processes can be quantitatively considered. With the help of exemplary calculations, Prof. Schwaiger was able to show that a portfolio made up of reputation leaders (Top 25%) beat the DAX-Index during a five-year-period by 28%.

Dr. Claus Stickler, CEO of Allianz Investment Management SE, held the third lecture about “Investment management in a global context”. The AIM SE administers 650 billion euros equity capital of the Allianz, as well as 120 billion euros from unit-linked life insurances, with the help of 500 experts in six regional hubs.
Dr. Stickler illustrated the global matrix-organization of the Allianz, which presets a clear process for the complete value chain of Asset Liability Management, through investment strategy, managerial selection, respectively Asset Management up to investment monitoring. A portfolio of this size requires clean analyses and consistent implementation. This often leads to conflicts of objective between regions and functions, which always have to be solved with regard to customer value. Due to low interest rates and strict regulation develops strong cost pressure, which leads to pooling of services beyond company boundaries. All services, which are not relevant to competition, can be offered to other insurers for refinancing. Digitization offers additional opportunities for automation and distribution.

The fourth speaker Prof. Dr. Thomas Hartung, chair of insurance industry studies at University of Bundeswehr, Munich, showed a scientific perspective on “False incentives in Asset Management through Solvency II”. The new guidelines are expected to drive the capital investment of 9,8 trillion euros in Europe and 1,5 trillion euros of it in Germany. Prof. Hartung illustrated, that Solvency II does not correlate with “real” respectively, desired risk. Capital life insurers (circa 60% of all assets) are able to economically plan more long-term than property insurers who need large liquidity short-term. Short-term models often with one-year-horizons overestimate capital market risks, because chargeback over time is not factored in. In addition, the diversification calculation about standard distribution is disputed. Furthermore, orientation to short-term market value undermines incentives to illiquid assets in long-term asset classes like stocks, real estate, infrastructure or securitization.

Last speaker of the day was Dr. Martin Lück, Chief Investment Strategist at BlackRock, who gave a current market outlook. For the first time since the financial crisis, a worldwide-synchronized growth can be observed in the most important economic zones, even though it happens on a low growth trajectory. Reflation continues, however inflation hardly increases in the Eurozone and in Japan. Technological progress has a dampening effect. Due to digitization, prices can hardly be raised, because in many sectors this causes pressure on corporations. BlackRock estimates the economic development of the G7-countries and expects that the 12-consensus prognosis will be surpassed. Interest rates will remain structurally low, which is why a fresh look at assessments is needed. Against this background, stocks seem relatively low-priced. Low volatility is no reason for concern, because 80% of the time volatility is low. At the same time political risks increase.

The 14th Annual Conference of the Munich Finance Forum e.V. will take place on September 18, 2018 at the AudiMax of the Technical University of Munich.

]]>850 Attendees At The 7th DKF Congress For Financial Informationhttps://www.financial.com/850-attendees-at-the-7th-dkf-congress-for-financial-information/
Mon, 22 May 2017 14:45:43 +0000http://www.financial.com/?p=2786The German speaking Financial Information industry gathered in Munich on 8 May 2017. Because of its central location between the financial centres Frankfurt, Zurich and Vienna, Munich is easy to reach. The conference for the German speaking financial information industry was held at the Hotel Bayerpost Sofitel. At the event, more than 45 vendors presented their offerings to more than 850 attendees.

]]>FinTech: Norton Rose Fulbright Presentationhttps://www.financial.com/fintech-norton-rose-presentation/
Thu, 18 May 2017 19:58:49 +0000http://www.financial.com/?p=2797At the FinTech conference of law firm Norton Rose Fulbright, Alexis Eisenhofer of financial.com held the keynote speech. The slides are available here.